I know a child that plays with a fresh dryer sheet and smells it all day. Is it harmful?

No. The developing mind is curious about everything exposed to, each one is a new experience to the senses. If something pleasing, the child will repeat it and repeat it and to some level become attached to it. Unfortunately, if the pleasure neurotransmitters of the brain are imprinted with the wrong things (fatty foods, improper physical contact, drugs), this may become a lifetime dependence.